The County Board is expected to buy a nearby 18-story building, one of its biggest acquisitions in years, for $25.8 million.
Seeking to consolidate the county's downtown Minneapolis office rentals, the Hennepin County Board Tuesday is expected to buy a pink-and-blue glass office tower that's across the street from the Government Center.
Commissioners will vote on a $25.8 million purchase agreement for the 701 Building, an 18-story structure at 701 4th Av. S. The deal would be one of Hennepin County's most significant building acquisitions in recent years. Rarely has the county bought an office building so big, expensive and relatively new.
But the 701, county real estate manager Michael Noonan said, "is a good opportunity to own rather than lease."
The county's public defenders office already rents there. If the deal closes in early June, the first new batch of county employees -- from the Environmental Services building near Target Field -- would move in this fall. That building is slated for closing to make room for a new light-rail platform.
Counting the public defenders, the county then would occupy a third of the building's 287,000 square feet.
The building is owned by Dallas-based investment firm Cawley Partners and a Chicago capital partner firm, which purchased it in 2007 for $15.3 million when it was about two-thirds empty. Cawley has since outfitted it with a fitness center and conference facilities.
The county's purchase price includes $2.5 million for leasehold improvements for which the county would be responsible, budget director Dave Lawless said.
While not exactly a fire sale, the sale price of $23.3 million works out to $81 per square foot. County officials said the price is less than a third of what it would cost to build such a building downtown. It was built in 1984 for $32 million.
"We're buying this at a low point in the market," Lawless told commissioners last week.
With the rent that the county collects from current tenants and the savings in rent by moving more offices there, Lawless said he expects the building would be paid back in 12 years. Only 11 percent of the building is vacant; last year's downtown office vacancy rate was 19.4 percent.
The building has about 20 tenants, including the Canadian consulate, financial services and law firms.
Building opened in 1984
Most commissioners meeting in committee last week raised no strong objections to the deal, although Jeff Johnson said he wasn't "thrilled with the idea of getting into the ... commercial landlord business." He said Monday he was inclined to vote against the deal.
Commissioner Randy Johnson, on the other hand, said he thought the 701 would provide long-term savings. Commissioner Gail Dorfman said its proximity to the Government Center, a single building of two towers, would create "a civic campus" and improve productivity.
The county plans to honor all lease agreements, which may keep parts of the buildings in private hands for at least 10 years. County offices would move in as space becomes available.
"It's particularly close to us, it's skyway-connected and its relative size is fairly good," Lawless said. "It matches our needs."
Noonan said the plan is to move the county's rented Grain Exchange offices to the 701. Offices also would be moved from the county-owned Century Plaza, an older building that Hennepin eventually plans to vacate as it shifts social services to sites across the county.
The 701 would be the third county-owned building by a world-class architect. Formerly called the Craig-Hallum building, it was designed by Helmut Jahn, known for the United Airlines terminals in Chicago and the Sony Center in Berlin.
The Government Center, opened in 1974, was designed by John Carl Warnecke. Cesar Pelli designed the five-year-old downtown library.
Kevin Duchschere • 612-673-4455